Blue Pennsylvania: Thoughts on the Eve of the PA Budget Deadline

The end of the fiscal year is upon us and, although we still have no state budget, the last few weeks in Harrisburg have been interesting relationships, as the following topics suggest.

Public Transportation and Skill Games

New money for public transportation was not a part of the budget that the state house passed in April.  However, a ruling delivered recently by the State Supreme Court has revived hopes for renewed resources for SEPTA and other transit companies around the state.

On June 15, the Pennsylvania Supreme Court issued a ruling declaring that many of the video gambling machines populating gas stations, fire houses, VFW posts, and convenient stores around the state are not skill games as defined by the general Assembly, but simply regular old slot machines, and are therefore illegal in their current locations.  The Court gave the General Assembly 120 days to come up with a plan to resolve this problem. 

One solution may be to keep the machines in place and tax them at 52%, which is close to what the casino industry is taxed now.  Similar arguments were made by the Democrats last year, but this year’s Supreme Court ruling gives such arguments extra urgency and potency.  Last year, money

from the skill game taxes were going to be used for public transportation.  The legislature can use this money as a dedicated source of revenue, but if it takes 120 days to resolve this issue, we may find ourselves in the same situation we were in last year, where school districts and non-profits needed to take out loans to tide them over until the legislature resolved the budget issues.  The deadline will also put us very close to November’s midterm election, and many voters will have already cast their ballots by mail. 

The State Budget and BBB

With the signing of H.R. 1 (aka “the Big Beautiful Bill), it is estimated that about 144,000 Pennsylvanians will lose their SNAP benefits, and that Medicaid will drop 310,000 state residents from its rolls.

Although Governor Shapiro’s budget proposal, which was approved by the Pennsylvania House in April, will not reverse these reductions, it will help to stem further decreases in benefits by adding $1 billion to cover the rise in medical costs for Medicaid recipients. 

The PA House approved budget also includes $87 million to cover new SNAP administrative costs that HR1 shifted onto states.  This money can be used to address errors made during the SNAP application process, which can lead to heavy penalties for the state if left unaddressed.

Data Centers and Education

Probably the whackiest relationship this week has been the relation of data centers to education.  Last week, the State House passed HB 2198, that would take away a benefit that data center operators have enjoyed since 2021 – an exemption for paying sales tax on computers, infrastructure, and other critical hardware.  For their part the State Senate passed a bill that would also achieve the same purpose.  But instead of introducing their own bill, or voting on the original House bill, they decided to amend a different House bill – HB 1667 – which was intended to address rural economic development.

While the amendment to rescind the data center tax exemption would put money back into the state coffers, the senate also included several other amendments on this bill that would reduce state revenues. 

Probably the most controversial of these amendments was one that would increase the educational tax credits in the state by $25 million.  Although Republicans are effusive about these voucher-like programs, the truth is that we know very little about how successful they are because Pennsylvania law prevents the state government from collecting such information as scholarship recipient’s academic performance, family income levels, household demographics, or the former school of the scholarship recipient.

To address this issue, the PA House last week passed HB 2632, that will allow the Auditor General to determine how effective this program is.

Natural Gas and the Budget

One of the problems with the PA House’s budget is that it is eating into the state’s structural deficit, which is expected to rise to $5.6 billion this year.  In the midst of this bad news comes a report -  “Valuing the Future,” - written by the Institute for Energy Economics and Financial Analysis, a research organization focused on energy finance, which accuses state lawmakers of imposing too light of a tax burden on the fossil fuel industry.  North Dakota, for example, produces about 60% of what Pennsylvania produces, and receives $3.1 billion annually in severance taxes.  Pennsylvania charges an impact fee and receives about $164.5 million. 

If we had a tax similar to North Dakota’s 10 years ago, the state budget would be running a surplus.

State Republicans have always favored the free extraction of our natural resources.  We can stop them.  Here is how.

Let’s support these candidates (below) that have a good chance of coloring both houses of our state legislature a nice shade of blue.

PA Senate

Candidate (Democrat)	District	Count(y/ies)	Incumbent (Republican)
Eileen Harnett Albillar	SD-6	Bucks	Frank Farry
Mark Pinsley	SD-16	Bucks/Lehigh	Jarrett Coleman
Chris Thomas	SD-24	Berks/Montgomery	Tracy Pennycuick

PA House

Candidate (Democrat)	District	Count(y/ies)	Incumbent (Republican)
Kristin Egan	HD-142	Bucks	Joe Hogan
Jeff Warren	HD-137	Northampton	Joe Emrick
Elizabeth Moro	HD-160	Chester/Delaware	Craig Williams

Thanks,

Coleman